Thursday, March 16, 2017

Tokenization in payments, government monopolies and debt

I was searching around looking for a discussion of pyment monopolies by Visa/Mastercharge. The economist had an article. and this popped out.

Economist: An even more hands-off payment option in many shops in America involves a firm called Square. Among other things, it offers a “virtual” wallet that stores details of a user’s credit cards and loyalty-scheme memberships and can be accessed via a mobile phone. To buy things with it, a customer does not even need to touch the phone—just have it with him. Square’s app can be instructed to turn itself on and “check in” when the user enters a store in the firm’s network; when he wants to pay, all he has to do is to tell the cashier his name and that he is using Square.

This is an online wallet that reveals as much of your identity as needed tocomplete the transaction. You trust it to guarrd your stuff. Here are our costs:

Yet banks are largely absent from this technological and commercial battleground. Payments are a huge business for them, bringing in $1.3 trillion in 2012, or 34% of their global profits, according to McKinsey, a consultancy. And these revenues have been growing steadily: by 3% a year in 2008-12, compared with just 1% a year for other income. As in their lending businesses, however, banks are finding that new regulations eat into their revenue from payments. The main target has been interchange fees, as banks’ charges for processing credit- and debit-card payments are known.

The entire model of payments has followed the central bank monopoly, over time. Larger banks who are connected to the debt cartel in DC get first wind of interest rate changes, and always had that edge in setting payment fees. Their currency risk was guaranteed by the senators. Inevitably, the currency risk equals accumulated losses,un-amortized debt that accumulates term risk costs as it gets rolled. Those losses get handed down to us in ATM fees, it is about 2% of our income in the USA, enough to account for the secstags. ATM fees are a federal tax, essentially, us little brown people covering the currency risk for wealthy people who manage the federal debt.